Measuring the Impact of Remote Work on Firm Performance Using Big Data

Abstract

We construct a firm-level measure of remote work for thousands of firms in the United States using data on the daily Internet activity of individuals from 2019 to 2022. We classify whether the Internet activity of each employee originates from remote work locations or the office and aggregate to the firm-level to measure the share of remote work activity for each firm over time. We implement a number of validation tests of our remote work measure, including a comparison with county-week-level mobile phone data on workplace visits. We find that a 1% decrease in workplace visits corresponds to a 0.756% increase in remote Internet activity. We then study the impact of remote work on firm performance using confidential tax data. We document a negative relationship between changes in remote work and firm-level total factor productivity (TFP). To account for selection effects, we implement two instruments for remote work adoption: pre-pandemic commute distance and employee political contributions. Within industry and location, both longer commute distances and Democratic-leaning donations are associated with a significant increase in remote work. In both specifications, we document an economically significant increase in firm-level TFP following a shift to remote work. Measures of employee shirking based on the websites they visit are consistent with these results: while remote work is associated with greater shirking activity in OLS specifications, this relationship disappears in our IV specifications. In the cross-section, the benefits of remote work accrue to firms with stronger monitoring ability and worker incentives. Joint paper Alan Kwan and Alexander Yuskavage.